This news article was originally written in Spanish. It has been automatically translated for your convenience. Reasonable efforts have been made to provide an accurate translation, however, no automated translation is perfect nor is it intended to replace a human translator. The original article in Spanish can be viewed at ¿Cómo interpreta Hacienda la deducción por I+D+i?

How does interpret finance deduction for r & d?

Alex l. Iturriza - www.norgestion.com01/07/2003

Consultations to finance can know what the interpretation of the Administration on tax law. The companies obtained through this instrument a more practical view of the tax incentives.

He has already been discussed in previous issues is the deduction for expenses in r & d (research + development + technological innovation) contained in the law on corporate income tax.

It is interesting to know the position of the Administration in these areas. In general terms, the interpretation of the Treasury is restrictive, trying to narrow to maximize this deduction through resolutions and responses to consultations, some of which we collect in this issue.

Research and development

Treasury considered that they are not likely to benefit from the deduction for r & d costs incurred to introduce a new line of manufacture of a product whose novelty is exclusively produced with respect to products or systems of production of the consultantno relation of the whole of the market (19/6/2001).

Technological innovation

However, the interpretation of the Hacienda in technological innovation is not so restrictive. Consultation of 16 February 2002 provides that the activity of innovation requires the existence of a subjective novelty and not objective, these is that the new product or process it is from the point of view of the taxable person even when they exist in the market.

On the other hand, the Administration is not likely to benefit from the deduction for expenses of technological innovation technology acquisition provides advanced for an information and management system internal more advanced and with new featuresSince the activity of the entity does not incorporate new technical knowledge and the outcome of the investigation is not likely to lead to a new product, these applications there are in the market (27/2/2001).

Example of deduction of r & d

or last, and as final to articles in which the deduction has been treated for activities of r & d, are an example of the calculation of this incentive on corporate income tax.

A company has conducted r & d activities. Expenditure for the financial year 2002, these activities are as follows:

30,000 euros for staff costs and consumption of materials.
6,000 eur in respect of repayment subject to r & d investments.
He has received 1,500 euros for the subsidy for financing of expenses for the financial year and 2,000 for financing of purchase of investment goods, of which EUR 400 are charged as income in the year.
Expenditure in the financial years 2000 and 2001 these activities amounted to EUR 20,000 and 30,000, respectively.

The basis of the deduction is composed of the following concepts:

Costs: 30,000
Amortization: 6,000
Grants: - 1.235 (1.900x65%: 1,500 received for current expenditure and 400 charged as income)

Total base deduction: 34.765 EUR

Average of expenditure from the previous two years: (20,000 + 30,000) / 2 = € 25,000
Amount of deduction: 10.429,5 (34.765 x 30%) + 1953 (34.765 - 25,000 = 9.765x20%)

Total deduction: 12.382,5 EUR

The application of the deduction has the limit of 35 per cent of the liquid share. The excess may be applied in the fifteen years successive and immediate